Blog Post

PayPal rolls out barcode payments in the UK

EBay’s (s ebay) CEO John Donahoe has called 2012 a year of testing and learning for PayPal’s in-store payments as it gears up for a big push next year. And the company is making good on that with the roll out of its first barcode-based payments in the UK at four major retailers. Starting Thursday, British consumers will be able to use a new PayPal InStore app to pay at 230 retail locations for Coast, Oasis, Warehouse, and Karen Millen.

The app, available initially for iOS (s aapl) and Android (s goog), allows users to pay at check-out by generating a barcode and transaction number, that can be scanned by retail employees. The money is deducted from a user’s PayPal account with a receipt sent to their email account. Users can also apply discounts through the app and they don’t have to have a cellular or Wi-Fi signal to complete the transaction. Purchases made online can also be brought in-store and returned using the app.

The barcode payment tool is just the latest test for PayPal, which is throwing a lot of ideas against the wall as it looks for the right tools to unlock in-store payments. It has also launched tests of QR-code based payments in Singapore, Australia and France and it tried a small pilot for NFC payments in Sweden at the end of last year. And with PayPal Here, its small business tool, it’s also shown how consumers can make proximity-based payments when they enter a store. It’s unclear what PayPal will actually offer its customers for in-store payments and it’s possible that different countries might get different tools.

“We’re not betting the farm on any one technology,” PayPal spokesman Anuj Nayar told me. “The advantage of a wallet in the cloud is all of these tools can access the same wallet and we’ll see what works.”

Nayar said PayPal is also still looking at NFC though it’s a technology that is slower in adoption. Starbucks (s sbux), on the other hand, has proven that a QR-code based payment app can be hugely successful and can work on the phones that people already have. PayPal is also working on apps for BlackBerry (s rimm) and Windows Phone (s msft) devices.

Mobile payments are expected to hit $171.5 billion in 2012, up 62 percent over last year, according to Gartner. By 2016, the market will be worth $617 billion with most of that coming from web-based payments in North America and Europe. NFC isn’t expected to play a big role in payments by 2016, said Gartner, which suggests that PayPal might be wise in looking at non-NFC payment options.

But more than anything, I think this shows how PayPal can become a huge player not just in the U.S. but worldwide with its in-store payment campaign. It already operates in 190 markets and that gives it the ability to test and launch all around the world over a short period of time. It recently announced a joint payment venture in Japan with Softbank and last week, it unveiled its first set of big retail partners in the U.S. This kind of scale can ultimately be beneficial in getting a lot of merchants and consumers on board though execution will still be critical. EBay’s CEO Donahoe is right in that this year is not the big year for in-store payments. Not with Google Wallet still slow out of the gates and Isis set to launch in only two markets this summer. But next year will be when the sparks start to fly and PayPal is getting some good experience as it gears up for battle.